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Canadians rack up record amount of debt (again) ahead of holidays

Canadian consumers are carrying more debt than ever with them into the holidays, with the amount owed by households again hitting a new all-time high, new data shows.

Total household debt in Canada grew 1.4 per cent in the three months up to Sept. 30, a pace nearly double that of overall income growth. That means Canadians plowed deeper into debt in the third quarter, pushing the closely watched debt-to-income ratio to a new record.

Statistics Canada said the amount of household debt compared with disposable income rose to 163.7 per cent, up from 162.7 per cent in the second quarter.

“In other words, there was $1.64 in credit market debt for every dollar of disposable income,” Statscan said.

READ MORE: Latest coverage — The Great Canadian Housing Boom 

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Home loans

Mortgage lending led the growth in debt levels.

Statscan said that after cooling off during the first few months of the year, debt growth has re-accelerated “mainly as a result of rising mortgage liabilities.”

Canadians took on an additional $20 billion in mortgage loans in aggregate in the latest three-month period, reflecting lower interest rates that have prevailed following two rate cuts from the Bank of Canada.

A stronger-than-expected job market in recent months has given consumer confidence to borrow more, as well, according to RBC economists.

“The effects of stimulative monetary policy working through the economic system as well as resilient labour markets year-to-date are evident,” RBC economist Laura Cooper said.

The re-acceleration of mortgage debt has helped fuel sharp jumps in home prices in the large and already expensive housing markets of Vancouver and Toronto, raising concerns about a possible real estate bubble forming in those cities.

On Friday, Federal Finance Minister Bill Morneau announced plans that will raise minimum down payment requirements on homes priced over $500,000. Experts suggest the move is aimed specifically at tapping the brakes on home sales in those centres.

Total household credit market debt, which includes consumer credit, and mortgage and non-mortgage loans, reached $1.892 trillion.

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Consumer credit debt was $572.3 billion, while mortgage debt stood at $1.234 trillion.

WATCH: Federal Finance Minister Bill Morneau said Monday despite growing debt among Canadian households he remains confident in the overall economic situation in Canada.